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Becktell Industries has an offer to build a special product for the state highway patrol. The contract will cover a period of 10 years. The
| Becktell Industries has an offer to build a special product for the state highway patrol. | ||||||
| The contract will cover a period of | 10 | years. The projected cash flows associated with | ||||
| the contract are given below: | ||||||
| Required: Complete an analysis to calculate the net present value of the above cash flows. The | ||||||
| company uses | 16% | as its cost of capital. | ||||
| Cost of new equipment | 300,000 | |||||
| Working Capital needed | 125,000 | |||||
| Net annual cash receipts | 85,000 | |||||
| Salvage Value at end | 60,000 | |||||
Should the contract be accepted? Explain in detail.
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Auditors Letter Handbook
Authors: American Bar Association Business Law Section
2nd Edition
161438973X, 978-1614389736
